What are Tax Codes?

Tax codes are the short hand way that HMRC communicate your tax position. They are written as a combination of letters and numbers that all have a particular meaning. It tells you, your employer and others how much tax you should be paying. This is very important if you pay income tax through the Pay As You Earn (PAYE) system as an employed taxpayer. Your employer works out how much tax should be deducted from your income using the information contained in your tax code.

Where do I find my Tax Code?

Your tax code is printed on your P45, P46, P60, and usually on your wage slip.

If you cannot find your tax code you can contact HMRC or you can refer to your PAYE notice of coding. A PAYE notice of coding is the letter HMRC send you at the beginning of each tax year to tell you what your tax code is.

New Tax Codes

You are sent a ‘P2 Notice of Coding’ form to tell inform you of your new tax code. Your tax code will usually change every year because the Personal Allowance amount is different every year.

The new tax code will be used unless your circumstances change. If your circumstances change it is common for a new PAYE notice of coding to be issued reflecting the change in your tax position for example if you have claimed job related expenses.

What does my tax code mean?

Every letter or number in the tax code represents a piece of information about your tax status.

For example, any tax code ending in the letter L refers to your tax-free Personal Allowance. In this case the number at the start (multiplied by 10) shows how much you can earn annually before tax. However, if you are over state pension age, you may receive a different tax code to indicate your Personal Allowance.

Any tax code including the letter K indicates that your untaxed income is greater than your Personal Allowance, which means you need to pay tax on the excess. This typically applies if you have received certain state or company benefits as well as earnings, or if you have an outstanding tax payment due from previous years.

More than one job?

If you have two or more sources of income you may be given more than one tax code.

This may be because you have more than one job, or because you are receiving a pension while you are earning. In these circumstances it is particularly important to make sure you have been given the correct tax codes, or you may end up paying too much tax or not enough tax.

Emergency Tax Codes

In some circumstances, such as if you change jobs and do not have a P45, you may be placed on an Emergency Tax Code.

This means tax will be deducted at 20% of your income until the correct tax code is worked out. If you have overpaid tax while on an Emergency Tax Code you will usually be able to receive this back in your salary in the same tax year, providing your tax code is changed in time. If your tax code is not changed on time you can still reclaim any overpayment of tax for the previous four tax years.

VAT (Value Added Tax) includes:
What is VAT?
When do I pay VAT?
How much VAT do I need to pay?
Do I need to register for VAT?
How do I pay VAT?
Can I claim VAT back?

Self Assessment includes:
What is Self Assessment?
Do I need to complete a Self Assessment tax return?
How do I get a Self Assessment tax return form?
How do I register for Self Assessment?
Can I register for Self Assessment on behalf of a company or trust?
What is a Unique Tax Reference number (UTR)?
How do I get a Unique Tax Reference (UTR) number?
How do I complete my Self Assessment tax return online?
Can I complete my Self Assessment tax return on paper?
Record keeping
Self Assessment Tax return deadlines
What if I submit my tax return late?
What if I submit my tax return incorrectly?
How is my tax calculated?
Do I need to check my tax calculation?

National Insurance includes:
What is National Insurance?
What are the different types of National Insurance?
Who pays National Insurance?
What is National Insurance used for?
Do your National Insurance payments affect your Pension and Benefits?
How much National Insurance should I pay?

More Info

TaxBanana.com provides free, impartial information about all aspects of UK tax. This does not constitute tax advice and TaxBanana.com is not liable for the consequences of any financial decisions you make based on this information.

Information Right & GDPR
The GDPR grants data subjects the right to receive certain information about the data controller’s personal data collection and data processing activities. This right forms a part of the data controller’s obligation to ensure the fair and transparent processing of personal data. The GDPR requires Tax Banana to provide detailed information to data subjects. Information provided to data subjects must comply with three GDPR Articles. Tax Banana fully comply with all aspects of the GDPR 2018.

This website uses cookies to help us improve your experience. By using our website you accept our Privacy Policy and use of cookies. Continue